TIM BENNETT: What we've seen in the last year particularly, is a lot of companies like a Yahoo! or a Google that are coming to us wanting to partner with us, and I think it's more efficient for us to do partnerships rather than trying to do it on our own or buying banner ads. We've really tried to do things with Orbitz, with Weather.com.
AA: But do you see things turning up?
Mr. Bennett: In the last year we became a lot smarter about our spending. We're still going to spend the same amount, maybe a little more, but just more intelligently.
JOHN SKIPPER: All of our conversations last year were about how do we use the medium, not about justifying the medium.
There is a great big thing that distorts the market and that is AOL. And we assume that all that money they got in 1997, 1998 and 1999 was advertising revenue, so if you look at the ad revenue it makes it look like the market went down and that money was not ad revenue. It was not media spending. They were partnerships done with AOL to drive traffic mostly by other Internet companies, and when the funding for those companies dried up, those deals dried up.
AOL's business has plummeted precipitously. They were the 600-pound gorillas-that makes it look like the market went down.
PAUL IAFFALDANO: Last year was the turn year, but it was the turn year because we as an industry for the first time really focused on how the medium is to be used. ... It was about how do I create a positive perception for my brand through an Internet presence?
And that resonated with advertisers, it resonated at agencies and money started to shift. I actually am very bullish. I actually think in the next few years we're going to see 25%-30% increases year-over-year in Internet spending.
RISHAD TOBACCOWALA: My sense is digital advertising will grow at 20%-25% a year the next four to five years. But by digital advertising it's not necessarily just online advertising. There are two things that are going to grow faster than online advertising: one is going to be clients beginning to understand what will happen to TV as it gets digitized, and the second is the gaming platform.
AA: How are you tackling the metrics issue and the emphasis on return on investment?
BILL LAMAR: The issue of return on investment is always paramount for any advertiser, but what we advertise is recognized in that it isn't necessarily about the efficiency measures. As a matter of fact, I'm more concerned about the effectiveness of my message than the efficiency. The story I like to tell is so I can go out and buy a great [cost per thousand], but if the customer I'm trying to communicate to isn't paying attention to it, doesn't think it's relevant to them, then what's my efficiency? There is no efficiency, I've just wasted money. ... How do I get my message on a medium in a situation where the customer is most likely to pay attention to it, act on it and have some change in behaviors. So for us, they'll visit us more often and be more brand loyal. That is really the key metric for us.
AA: Are you getting that from your partners and from your agencies?
MR. LAMAR: That as we get into new vehicles ... the measurement will always lag. As an advertiser you have to use judgment and the best thinking of your agencies, like Rishad for us, to make those judgments. So, that we're lagging as far as true measurement of effectiveness, but quiet honestly I could debate with you how effective [TV's] measures are and they've been in place for years and years and years.
AA: But isn't that more of a comment on the interactive industry not providing standard measurements?
MR. TOBACCOWALA: One is that and the other, and to Bill's point, McDonald's and a lot of clients are constantly looking at outcomes and less and less at inputs. So, in fact, we believe that return on investment is a bad term. It should actually be what we call "ROO," return on objectives. ... What tends to happen is that you need to do customized research to a certain extent based on what the client's objective is, and return on objective becomes very important because, as Bill says, "What do I get for it?" The description we basically set is "How does the hot dog taste?" not "How cheap the pig was."
DAVID COHEN: I don't know if it troubles anyone else in this room and I don't want to mire this in real tactical stuff, but the very foundation or the very building blocks of our industry-syndicated research, reach and frequency discussions-are really troubling. As we report to our clients that we've been trying to talk in a similar language as our traditional media brethren do, and we report these as fact. We do reach for frequency runs based on sound research and insights, and we report on them and we add them to our media plans, but in fact they are fallacious. I don't know what those numbers are really based on.
AA: Are we're talking about ComScore?
MR. COHEN: We're talking about reach and frequency, we're talking about defining an impression. We're talking about the basic fundamentals of this industry.
Mr. Bennett: Isn't that the same though as with magazines? I mean, we struggle with that with print because a certain magazine will say that they have X amount of subscribers and there are that many impressions, but that doesn't guarantee that somebody actually stopped and looked at that ad, no different than somebody clicking on the Internet.
AA: Do the marketers in the room have any thoughts about how to alleviate this?
MR. LAMAR: My own point of view is that the traditional measures in media are good because they give you a common starting point in a trend. To make decisions off of them solely, which too often people have done in our industry, is part of the reason for mediocre or less success.
We are a retailer. In McDonald's we have millions of people who visit us each day and we need millions and millions more to visit us every day. So we have a very sensitive measure of one of the key outcomes-customer traffic. Just as I'm sure Tim does with the car dealerships. We can measure customer traffic. I can at times on a control basis actually tell you what a vehicle has done. We did a study on the impact of public relations, and I did a test and control and unpaid media delivered 10% to 15% greater traffic with that use. I'm not wedded to any media.
MR. TOBACCOWALA: To an extent, just for us, McDonald's has gone from being an important, to middle-sized client, to being one of our three biggest clients. In the last six to eight months there is something real there.
Let me give you a few reality checks. One is we are using it differently. Recently we did something with Nickelodeon and Nick Jr. Magazine, which is we thought about "OK, how do you get to kids in the laps of their moms to do something with Ronald?" So we did a tie-in. ... When you got your Nick Jr. Magazine it was polybagged with a CD-ROM. The CD-ROM allowed you and your mother or father with the child to interact. We worked and developed this with Nickelodeon and some sub-sites, etc.
Another component, we did something particularly wild with the site very popular with kids called NeoPets, where people can actually go bidding for different things. [A top item] they spent their Neo-dollars on ... was a McDonald's ice cream sundae. People were basically paying for it.
MR. TOBACCOWALA: There is a lot that can be done which is objective-based, but part of it is that we as an industry have to behave like grown-ups to play with the grown-ups and that's what I keep saying, which is: how can we say we are going to replace other media?
MR. SKIPPER: We've never said that we were going to replace other media since we have other media. Though that's not really career-friendly.
AA: Well, you're generally multiplatform and more integrated than ever.
GORDON PADDISON: You're both right. I mean there isn't a right and wrong here. They are both good points, but I mean at least for us, since we're not selling widgets, we're selling a lot of time which is an intangible. ... For us in theatrical marketing being able to go to affinity groups and target them like we did for "Lord of the Rings" [enabled us] to really move the needle. As we broadened it out, we found from our research, because we've been tracking everything that we do for years, we found it's not anything new, but we've been able to find out from our consumers more information.
So we've been able to say, "OK, 25-plus have gotten their information from newspapers for X amount of years, 25 and below are getting their information from online." And as we've solidified this, we've been able to make a proper show to management that this is where we're driving the most effective change in being able to drive consumers to the box office.
AA: John, what was your biggest hit this year?
MR. SKIPPER: Motion (ESPN's premium product that allows advertisers to stream their TV commercials online) has been the biggest hit for us this year.
MR. SKIPPER: Because it is advertising that everybody understands. It's your commercial and you can run it online and reach real consumers, and like our friends at Weather.com, we do a lot of post-campaign measurements. We're tending to try to measure intent to purchase, attitude toward the product, and it tends to work. Right now we are running very successful motion programs for Coca-Cola [Co.], and these tend to be integrated.
AA: What categories are flocking to Motion?
MR. SKIPPER: Big advertisers. McDonald's [Corp.] and Coca-Cola Co., General Motors [Corp.]. That's who we want to be in business with.
AA: What is the biggest challenge in getting buy-in from senior management to make a major commitment to digital marketing and media?
MR. LAMAR: I don't think it's necessarily unique to digital, but new and different, and change always requires persuasion and selling, and digital is no different. It's new, relatively. It's not traditional and understood, and fairly often as you get into more senior ranks of most companies, the age and interests of those executives aren't necessarily ones that allow themselves to be involved in digital on a daily basis.
AA: Is it easier in the entertainment business, which has been a leader in online, to get money for online spending?
MR. PADDISON: I don't think anything is a no-brainer because probably McDonald's spends more in aggregate on digital media. We are very conservative. Not only my company, but most studios are fairly conservative. But it is about trying to find that emotional connection to consumers that will drive them to make an impulse purchase. So it's finding the right mix.
MR. LAMAR: Consumers having greater control is really the outcome of the technological revolution that we're a part of. So whether it's a DVR (digital video recorder) or text messaging it's almost kind of tactical in this discussion. The solution is, "How do I develop creative content that the customer will want to pay attention to?" That is the thousand-dollar question. Not "Where am I?" It's where they are knowing that they want more control.
AA: How will you meet the challenge of increasing consumer control?
MR. TOBACCOWALA: One of the key things is the question of how do we create new forms of content. ... You've got to find new, different and interesting ways to engage me. And the key thing about this medium is it's malleable. It's no longer 30-second units or print ads or things like that; it could be anything. And guess who we are going to have to work closely with? People like these guys. Much closer than anyone else.
AA: Closely with the publishers?
MR. TOBACCOWALA: Very closely with the publishers and very closely because the publishers to an extent are content creators.
AA: Predictions for online spending. By what percentage will your online media budget rise in 2004 vs. 2003, or flat?
MR. PADDISON: Each year it has incrementally increased, and it's not based on percentage.
MR. LAMAR: We'll spend more.
AA: Single-digit percentage points?
MR. LAMAR: I have no idea. We're putting our plans together.
MR. BENNETT: Our overall marketing budget has increased, so naturally the online will increase again. Like Bill, we don't say 10% is here and 15% is here, 30% is here.
AA: One last question. What do you think is going to be the biggest issue in interactive space next year? What problem or issue will dominate our headlines?
MR. IAFFALDANO: I can't remember who was talking about trust, but our medium has a bit of a black eye. Right now we have some really bad things going on that are associated with our medium.
The whole issue of spam. The whole issue of how people are opted in or are sort of not opted in, but are spidered into networks. How consumers are treated in our space. There is a small and hopefully shrinking group of marketers and ... publishers that really mistreat consumers. That's the biggest issue.
MR. COHEN: How do we run a profitable business?... I think that's got to be a big thing that we need to think about for 2004.
MR. TOBACCOWALA: The biggest challenge next year across all media ... will be how can we, in an increasingly consumer-controlled world, learn how to engage consumers without enraging them. That's gonna be the key trick.